I’m a staff writer covering all things Wall Street and Investing. I have a love hate relationship with the world of finance. I am fascinated by the industry’s power and influence around the globe, and the ingenuity of the people it employs. Not so much a fan of the lack of accountability when the system fails—which it often does: I'm always on the hunt for people and companies to profile.

ZeekRewards And Why Ponzi Schemes Will Never Go Away

What is about Ponzi schemes that keep them alive? Much of it has to do with the investors who buy into them.

The SEC is in serious Ponzi-busting mode. In three days the federal regulator announced fraud charges against three Ponzi schemes representing almost $700 million.

The biggest was ZeekRewards, an alleged $600 million internet Ponzi scheme that involved one million customers. The SEC shut down the operation Friday. On Thursday the agency announced fraud charges against a former college football coach for an $80 million Ponzi scheme that included other college coaches and former players among its victims. The day before that the SEC announced fraud charges and an emergency asset freeze against a Denver-based company and two Colorado residents carrying out a $15.7 million Ponzi scheme involving 120 investors nationwide.

“One would think after Bernard Madoff got nailed and went to jail for 150 years these kinds of crimes would slow down. But the bad guys don’t think that way. Instead they might say, ‘Madoff took $65 billion. I don’t need that much. I just need $10 million.’ It’s perverse but it encourages them rather than deterring them,” says Anthony Michael Sabino, a professor at St. John’s University‘s Peter J. Tobin College of Business.

Before market timing and insider trading there was the Ponzi scheme. The scam has been around for at least 90 years when Charles Ponzi duped thousands of investors out of around $20 million in a coupon scheme. Regulators have been going after various Ponzi schemes of all sizes over the years from the massive $65 billion Madoff fraud to affinity Ponzi schemes like the one that targeted a Persian-Jewish community in Los Angeles recently.

“ZeekReward’s alleged scheme is breathtaking in that it involves hundreds of millions of dollars but other than that there’s nothing shocking about yet another Ponzi scheme being exposed,” says securities industry lawyer and Forbes contributor, Bill Singer.

What is about the scheme that keeps them alive? Much of it has to do with the investors who buy into them, experts say. Singer notes that often time the victims of Ponzi schemes are sophisticated and aware of the pitfalls of investor fraud.

“A successful Ponzi scheme requires an investor who thinks he is smarter than he really is and a fraudster who makes him think he’s being given an opportunity no one else is getting. It’s an unholy concoction, and the most fascinating part is that most of the time the people getting ripped off are not ignorant to scams,” he says.

Dan Seiver chief economist at Reilly Financial Advisors and professor at California Polytechnic State University says greed keeps most Ponzis running. “Investor education often falls apart in the face of offers to “make money fast.” If you get people in early and give them a great return then those are the people who will end up helping you run the scam. It spreads to their friends and family.”

Of course technology has helped fraudsters, too. The internet gives scamsters scale allowing them to reach their potential victims outside their proximity. It also allows them the ability to remain anonymous. “Technology allows them to reach out and harm more people across oceans and national borders,” Sabino adds.

Now, for instance, the Allen Stanfords of the world can live in the Caribbean and conduct wire and mail fraud, obstruction and money laundering in a $7 billion Ponzi scheme from the comfort of his home there.

But then there’s another element helping keep Ponzi schemes alive that may surprise you. The regulators. Lawyers who have represented both sides of the Ponzi cases say criminals often use the details in Ponzi cases that regulators make public as a guide of what-not-do.

Singer says the FBI and SEC ought to be more careful in the details that make available. “With all due respect they are not making a dent in the fraud and in fact dangerously misleading the public,” he says.

How? Says Singer, “If you read about all these cases you get the idea that the good guys are catching the bad guys. In reality, for every bad guy that’s arrested there are others who read about the mistakes made and create a different version of that fraud.”

Adds Siever, “The next Ponzi scheme is always going to look a little different from the last. The best advice is the oldest investment advice: If it’s too good to be true then it probably is.”

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Muhammad you’re ignorant if nothing else. Helping a common man was never the intention of these scum bags, separating people from their money was more like it. You like so many others were part of their scheme and you can consider yourself lucky that you’re not finding your ass in jail.

I put $5K into Zeek and never withdrew a penny, so obviously I am sick to my stomach because I thought I did enough due diligence to “know better”. Guess I am the laughing stock now. But, it’s okay because I will continue on. Hopefully we might get some of our money back, we’ll just have to see.

I did find this new company that is in pre-launch that “on the surface” looks really good, but we have all heard that story before. I signed up for FREE (you can too) while it’s still in pre-launch and they are expecting THOUSANDS of people to be in this program. I was only 8 away from the top spot so, (considering it did not cost anything) I locked my spot. Can’t wait for massive spill over.

Dwayne, if you’re stupid enough to write a post leaving a link to another ponzi scam in your response to a Ponzi scam article, then you deserve to have lost $5K but I have serious doubts that you really did. Same deal, no product and it takes referrals to make money. Dah wake up pal.

Anon: What is truly interesting to me is why you would not use your real name if this program is so legit, but I digress.

Let’s see, you have the founder who’s resume includes everything from find the cure for aids to being a genius programmer, but can’t launch his program The only thing missing from his bio was his creating world peace. The same genius who has had to open his founders opportunity twice after declaring there was a drop-dead date for the suckers, err founding members to join, and let’s not forget his involvement in another Ponzi oneX.

We have a lot of flashy webinars, but no substance but a lot of hype. At the rate he is going this won’t launch by December, but hey the promises are so good not to give it a try. After all it’s only $23 for a founder’s position. That should be your first clue this is a Ponzi. But when you get 20,000-30,000 “founders,” not bad money for him but zero for you.

Warning from North Carolina Attorney General: all victims of Zeek should watch out for “reload scams” targeting them!

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WATCH OUT FOR “RELOAD” SCAMS

Monday, August 20, 2012

Reload scams hit consumers when they’re down, offering to help them make back money they lost to a previous scam or bad business decision. These scams have been popular for years with telemarketing fraud rings but can also follow other types of fraud.

We’re now seeing reload scams seeking to recruit consumers who were members of Zeekler, a penny auction website headquartered in North Carolina that shut its doors last week and entered into a settlement with the U.S. Securities and Exchange Commission. The SEC determined that Zeekler was a Ponzi scheme, using money from later investors to pay back earlier investors until the scheme started running out of money. The Attorney General’s Office is continuing to investigate Zeekler.

Blogs, news releases online, and individuals leaving comments in articles about the Zeekler shut down are already touting opportunities “for those that are looking for something that can help them replace the income they were receiving from Zeek Rewards.” If you’ve been a part of a scheme such as Zeekler that collapsed, or if you lost money to another recent scam, don’t fall for a reload scam. Better to cut your losses than lose even more.

Great article, but I would also add that the way you put a stop to these Ponzi’s is to charge the major promoters of these Ponzi’s. They just go from Ponzi-to-Ponzi with no consequences. They bring a lot of people with them to the new Ponzi de Jour and they are out long before there is any signs of trouble.

Most of the time I can tell if it is a Ponzi just by who is promoting it, but I don’t just rely on that fact alone. But after nine years, I can tell you when I do see them in a “real” program, they have all been Ponzi’s. Coincidence?

I can’t wait for the day when they are charged just as the person(s) running them. Then you will start to see a decline in these Ponzi’s.

Sammyz…most of the people who are in jobs will never understand an entrepreneurs mind and thats why they stay in jobs .Can you imagine a person witha job mentality to writing about real world business. If they know, they would be under a BOSS.Most of our countrys leaders are the same job mentality. With Zeek rewards , the sec alleged that it was promoting investments and securities , when it was really not the case.They do not want to listen to the peoples voice.Its all about control.See thsi petition …https://petitions.whitehouse.gov/petition/support-keeping-zeek-rewards-open-stop-sec-and-attorney-general-stealing-our-business/YTbTXj3q

Only one problem with your comments. My guess is that 95% of the members of Zeek have never run a business before in their lives and were working in “the job.” If they had run a business before, they sure wouldn’t have been in Zeek. Their due diligence alone would have told them it was a Ponzi immediately.

You really need to stop believing all the hype you were fed, and start really analyzing Zeek. You can start with their 2011 Financial Statement. Then you can review how Paul lied about the six countries that were banned. He claimed they were sanctioned by OFAC and Zeek could not deal with them. OFAC says not a one of the six were on any kind of restriction or sanctioned. Then we can go to their claim they “outgrew” their local banks. Odd don’t you think that if you were switching banks you would tell your affiliates weeks or a month in advance rather than just 4 days. Hint: The banks told Zeek to move their accounts. Then we had that Zeek did not use foreign banks ever, and then you found out they did.

But the really big elephant in the room was how fast Zeek was growing, and all those bids that were supposed to be bringing all those bidders to Zeekler’s auctions, and the daily ROI never changed more than .02%. When you added up all the bids placed for all the auctions on any given day, took the winning bid price and added them all together, there was no way the daily payout could remain the same. According to Zeek the daily payout was coming from profits of the bids and auctions; and it was the only revenue source for Zeekler. Can we say Ponzi?

If you really believe that “entrepreneur mind” means giving some company your money, and posting “one ad per day”, you need to find an exit from whatever la-la land you’ve been living in (and still are).

What does popularity had to do with it? Grupo DMG Ponzi in Colombia had SIX MILLION members. The Albanian Lottery War (which is really a bunch of Ponzi schemes) involved up to 40% of that nation’s GDP. So what? Logic and facts dictate reality, not number of believers.

I just could not resist pointing out that the US Federal Government has been running a Ponzi scheme on the American people for many years now and it has got to stop. I, for one, am so sick of it and I would like it to stop now. Someone should do an article on the American Democratic Ponzi Scheme.